Low oil prices give Gulf countries reason to focus on clean energy and productivity

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 Shutterstock l  Marynchenko OleksandrThe 2014/15 oil price collapse may actually provide an opportunity for the Gulf region to focus on “green” economic thinking and on maximizing energy productivity overall. Given their large hydrocarbon resources, the Gulf Co-operation Council (GCC) countries in particular have a large stake in the global transition towards sustainable energy . Using clean energy as a tool to raise their productivity could support the growth of these economies, providing them with opportunities to truly engage in Research & Development (R&D) programs at a scale. Such opportunities are important both for labor markets and industrial diversification, as they provide the sort of ‘home grown’ industries that policymakers have been promising their young and increasingly educated populations.
 
If there is a good time for the GCC countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (UAE)—to place energy productivity at the core of their priorities and policies, it is now. Energy productivity is a measure of economic output that can be created from a unit of consumed energy. An energy productivity approach would allow GCC countries to generate more wealth  per unit of energy consumed, and to go beyond focusing on energy efficiency towards optimizing energy use. Increased energy productivity would enable the GCC countries to identify levers for maximizing growth and boosting the competitiveness of their economies.

In comparison with both developing and developed economies, the GCC was lagging behind the trend towards improved energy productivity between 1980 & 2014 . All other countries have shown an upward trend in maximizing their economic value per unit of energy consumed, with Germany, Japan, Brazil, and Mexico leading in energy productivity levels. In absolute terms, by the end of 2014, these countries—as well as the USA, China, and Norway—had increased energy productivity with values far more than the GCC countries.
 
Energy productivity for the GCC and selected countries 1980–2020

Lingering low oil prices, together with new global energy technologies, offer the GCC countries a well-timed opportunity to realign their energy policies and broaden the range of their energy products by focusing on clean energy to strengthen industry competitiveness and, eventually, to increase energy productivity.
 
The past decade has seen an impressive amount of development in the GCC in terms of clean energy, ranging from alternative technologies, diverse R&D programs, demand-driven efficiency, more easily sustainable buildings, the beginnings of advanced public transport systems, and proliferation of green growth strategies. All are now part of everyday news in the GCC.
 
The focus of their policies now needs to shift. Investment in the GCC has been largely focused on meeting the fast-paced growth of domestic demand (for example, in electricity, water, transport, and building). However, this approach has not kept up with growing domestic demand in other sectors. For instance, rising demand for fossil fuels in the domestic market is threatening the competitiveness of GCC economies.
 
Now that renewable energy targets have been set by policymakers, commitment by governments—mostly Saudi Arabia, UAE, Kuwait, and Qatar—is emerging to support R&D with increased emphasis on renewable energy technologies. A handful of solar projects have been implemented or under construction. Yet a firm pipeline of renewable projects—as well as energy efficiency for investments at a scale—is still not happening. Similarly, scaling up energy efficiency investments is still slow.
 
The GCC countries are facing one of the greatest challenges in terms of ensuring secure energy supplies at affordable and sustainable prices to make economic development possible and allow the wellbeing of their people.
 
Improving energy productivity offers a compelling, and perhaps imperative, case for the GCC to meet their domestic energy needs, generate private sector jobs, and widen the competitiveness of their energy-related manufacturing industries. This is a major initiative that involves creating a shared vision, as well as bold, adaptive, and forward-looking policies that capture synergies among respective economic sectors in the improvement of energy productivity.
 
An energy productivity initiative can offer the GCC the means to achieve long-term growth , as well as showing solid commitment to green growth. Ambitious initiatives have already been seen in the GCC: what is needed now is the integration of sound policies to create a sustainable energy productivity ecosystem for higher economic value and lower energy demand per dollar output.
 
The GCC possesses the key ingredients to become more active in the global clean energy arena , and in the development of new, clean technologies. Their challenge is to become players in energy technologies innovation, diversify their energy industries landscape, and reshape the competitiveness of their global energy sectors.

Authors

Waleed Alsuraih

Senior Energy Specialist

Join the Conversation

carla smith
December 08, 2015

This sounds like a project that the global community could really get behind. Marketing these ideas would be very helpful to raise awareness worldwide.
Thank you,
Carla Smith

Khalid Othman Alkadi
December 11, 2015

With a clear vision we can change the incoming crisis before we have to kick country in higher gear what i mean by the above that we can't relay on Ministry of water and Electrcity to come up with a strategyto diversifying. the country energy resources.

Nadir Mohammed
December 11, 2015

Very good blog Waleed! Indeed the GCC countries can reduce their energy intensity and the timing is perfect. Low oil prices strengthen political commitment to reforms and the public usually accept such reforms during fiscal pressures. Reforming the energy subsidy systems will lead to some of the desired results. More efforts on improving energy efficiency (through changes to air-conditions, lighting, standards for cars, revision to building codes, reducing technical losses, etc.) and more reliance on renewable energy (solar and wind) will certainly improve energy productivity.

Luiz Maurer
December 11, 2015

Very insightful
Congratulations
Lm